Executives from Warner Bros. and New Line Cinema met with Key and won an agreement for a change in labor law and bigger tax breaks to keep the $500 million project in New Zealand after a dispute over pay and conditions for actors threw the production into turmoil last week.

"It's good to have the uncertainty (surrounding the movies) over and to have everyone now full steam ahead on producing these two movies," Key told reporters after two days of intensive talks in the capital, Wellington.

Economists have said the overall value of producing the films in New Zealand would add up to $1.5 billion to the local economy. The flap began after New Zealand Actors' Equity imposed boycott on the project last month after Jackson refused to hold talks on wages and conditions for local actors.